Effect of Changing Technology on Hospital Costs

For many years the hospital industry has been introducing new and improved medical services. The introduction of these services has been responsible for a large part of the increase in hospital care costs. Such services arise largely from the availability of the new medical technology, procedures, and techniques. A simple example is the use of new and expensive drugs and medications. A more dramatic example is the increased use of open-heart surgery, which can require specially equipped operating rooms and additional supplies and materials, as well as skilled personnel for the surgical team. The result is growth in capital expenditures, operating espenses, and wage payments. Additional &vices-and subsequent increased expense&-may also involve services not directly related to medical care such as construction of new parking lots, renovation of waiting rooms, improvement in the quality of food served, and the installation of televisions and telephones. The labor and capital involved in providing new and improved services, referred to .by economists as additional inputs (laboF and nqnlabor), repres.$nt added costs “to the hospitals This not,++c$es the rise in hospital cost by isolating those: increases attributable to the additional inputs from the increases necessary solely to maintain a constant level of hospital services. The latter increases are the raises in hospital employee wages and the growth in prices paid for other goods and services. Because the data on inputs (and on prices and wages) are shown on the basis of co@ per patient day, they would not include costs attributable to